1. Govt likely to decide on small savings rate by December-end

Govt likely to decide on small savings rate by December-end

RBI and banks have been pressing for reduction in small savings rates and bring them in line with market rate for effective transmission of monetary policy.

By: | New Delhi | Published: December 6, 2015 2:00 PM
(2) Every little bit counts for your future – Regardless of the amount, set aside money each month for your short and long-term savings. If you have trouble remembering or fitting savings into your budget, try setting up an automatic transfer into a savings account.

The median base lending rates of banks have come down by about 60 basis points as against a 125 basis points of the policy rate reduction since January.

Finance Ministry is expected to take a call on interest rate on various small savings like Post Office savings and Public Provident Fund (PPF) by the end of this month.

RBI and banks have been pressing for reduction in small savings rates and bring them in line with market rate for effective transmission of monetary policy.

With small saving deposits commanding a rate of 8.7-9.3 per cent, banks have been reluctant to transmit the entire policy rate reduction by Reserve Bank to borrowers.

Interest rates of various small saving schemes will be reviewed and a final decision may be taken towards the end of the month, sources said.

Smalls saving schemes include Post Office Monthly Income Scheme (MIS), PPF, Post Office fixed Deposit Scheme, Senior Citizen’s Savings Scheme, Post Office Savings Account and Sukanya Samriddhi Accounts.

The Finance Ministry in September had announced its intention to review interest rates on small savings after bankers said high rates on such schemes run by the government make it difficult for banks to cut fixed deposit rates.

Last week, Finance Minister Arun Jaitley had said the government will bring down interest rates on small savings “cautiously” so as interest of savers from weaker and vulnerable sections are not hurt.

As a lot of people depend on small schemes, Jaitley had said, “We as an elected government have to look at it in addition to the economic principles with a sense of political pragmatism.”

Even RBI Governor Raghuram Rajan had said the rate reduction on small savings like PPF and Post Office deposit is also going to bring down the cost of fund for banks.

“The government is considering small saving rates and tying them more to market interest rates. I think these actions will help (effective monetary policy) transmission,” Rajan had said.

The median base lending rates of banks have come down by about 60 basis points as against a 125 basis points of the policy rate reduction since January.

  1. Major
    Dec 6, 2015 at 10:19 am
    The SCSS interest rates must not be reduced in the interest of senior citizens. They depend on this in the absence of social security provisions.
    Reply
    1. Major
      Dec 6, 2015 at 10:19 am
      The SCSS interest rates must not be reduced in the interest of senior citizens. They depend on this in the absence of social security provisions...
      Reply
      1. G
        gmrpsbc
        Dec 6, 2015 at 11:00 am
        Do not CHANGE Interest Rates for Senior Citizenz.
        Reply
        1. G
          gmrpsbc
          Dec 6, 2015 at 11:02 am
          Do not Change Interest Rates for Senior Citizens.
          Reply

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